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Bowling Alone, Buying Alone: The Decline of Co-Borrowers in the US Mortgage Market

Author

Listed:
  • Egle Jakucionyte

    (Bank of Lithuania, Vilnius University)

  • Swapnil Singh

    (Bank of Lithuania, Kaunas University of Technology)

Abstract
Using the universe of mortgage applications data and detailed credit performance data, we document that since the early 1990s there was a significant decline in the share of mortgages with co-borrowers. Although the decline was an almost universal phenomenon across different regions of the US, the rate of the decline showed significant spatial heterogeneity and in turn had implications for regional differences in economic activity. We show that the presence of a co-borrower reduces the mortgage default probability by more than 50 percent for both prime and subprime loans and those regions that had a lower co-borrower share prior to the crisis experienced higher mortgage default rates over the period 2007-2010. Higher default rates created spillovers on economic activity during the Great Recession: a lower co-borrower share at the regional level was also related to persistently lower house price growth, refinancing growth and mortgage credit growth. These results imply that the decrease in the share of mortgages with co-borrowers made the US mortgage market more vulnerable to the financial crisis and contributed to the divergence in economic outcomes across different regions.

Suggested Citation

  • Egle Jakucionyte & Swapnil Singh, 2020. "Bowling Alone, Buying Alone: The Decline of Co-Borrowers in the US Mortgage Market," Bank of Lithuania Working Paper Series 78, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:78
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    References listed on IDEAS

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    Cited by:

    1. Scott Fulford & Joanna Stavins, 2022. "Does getting a mortgage affect consumer credit use?," Review of Economics of the Household, Springer, vol. 20(3), pages 955-991, September.
    2. Jason Allen & Kyra Carmichael & Robert Clark & Shaoteng Li & Nicolas Vincent, 2024. "Housing Affordability and Parental Income Support," Staff Working Papers 24-28, Bank of Canada.
    3. Goodman, Laurie & Zhu, Jun, 2023. "Single borrowers versus coborrowers in the pandemic: Mortgage forbearance take-up and performance," Journal of Housing Economics, Elsevier, vol. 59(PB).

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    More about this item

    Keywords

    Residential mortgages; Foreclosure; Non-banks Lending;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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